By TIOL News Service:

NEW DELHI, MAY 13, 2016: THE appellant sold Sunflower De- oiled Cake (SF DOC) and several other goods in the course of inter-State trade and commerce and in the course of the said transaction the appellant produced 'C' Forms obtained from the dealers in inter-State sales. The assessee had admitted the liability of tax at 2 per cent on the sale of SF DOC in the course of inter-State trade and commerce. The Deputy Commissioner of Commercial Taxes (Assessment) Chitradurga, the assessing authority, had passed an order of assessment under Section 9(2) of the Central Sales Tax Act, 1956 (CST Act) on 29th January, 2005, whereby it had expressed the view that a sum of Rs.4,75,68,764/- was subjected to tax at 2 per cent. The assessing officer had granted the benefit on production of 'C' Form in terms of the Notification No.FD 119 CSL 2002 (2) dated 31st May, 2002.

After the order of assessment was passed, the succeeding assessing officer formed an opinion that there was an escapement of tax due to the reason that the inter-State sales of SF DOC was actually liable to tax at 4 per cent and not at 2 per cent, which had been erroneously adopted by the earlier assessing authority. Following the principles of natural justice, he levied the tax at 4 per cent on the inter-State sales of SF DOC.

The aforesaid order was called in question in an appeal before the Joint Commissioner of Commercial Taxes (Appeals), Davansere Division, Davangere under Section 20(5) read with Section 9 (2) of the CST Act. The Appellate Authority noted the submissions advanced on behalf of the assessee as well as the revenue and came to hold that the change of opinion could not have been a ground for reopening of assessment in exercise of power under Section 12-A of the KST Act and, accordingly, set aside the order of re-assessment.

Though the assessee succeeded, yet it preferred an appeal, being STA No.425 of 2006 before the Karnataka Appellate Tribunal, Bangalore ('the tribunal'), as the first Appellate Authority had not expressed any opinion with regard to rate of tax on oil-cake and de-oiled cake. It was contended before the Tribunal that the oil cake and de-oiled cake as per the commercial parlance are one and the same and, therefore, the rate of tax has to be at 2 per cent and not 4 per cent. The tribunal after noting the submissions referred to the schedule in the notification and came to hold that Reassessment order passed by the DCCT (Transition), Chitradurga under CST Act, 1956 for the year 2002-03 in respect of rate of CST levied at 4% on the turnover of Rs.4,75,68,764 relating to inter-State sales of sunflower de-oiled cake covered by C Forms is modified to 2% allowing the benefit of reduction in the rate of CST to 2% granted in the Notification No.FD 119 CSL 2002 (2) dated 31-5-2002.

The aforesaid order of tribunal was assailed before the High Court in Revision Petition.

The High Court held thus:-

"The contention that the commodities will have to be understood in common parlance as understood by a common man is even harder to accept. What a common man understands need not necessarily mean what is understood in accordance with law. In the instant case, the framers of the schedule were aware of the distinction between oil cake and de-oiled case. Accordingly, they have treated it as two different commodities. Therefore, to hold that the view of a common man has to necessarily over ride the view of the Legislature is difficult to accept. The Distinction in law has been made which requires to be followed. Oil cake and de-oiled case cannot stand extended to de-oiled cake. The impact of the notification reducing the tax impact was every well known when the benefit was granted. A notification has to be strictly construed. The Court cannot read into the notification what is not there. The notification is clear and unambiguous. Any attempt to read it otherwise is not only uncalled for but would amount to redrafting the notification."

The said judgment and order is the subject matter of challenge in this appeal by special leave.

Though the Supreme Court agreed with the said conclusion of the High Court, yet the fact remains that the assessing authority had expressed the opinion with regard to the rate of tax on the de-oiled cake while scrutinizing ‘C' Forms which is an expression of opinion on the available materials brought on record and, therefore, the first appellate authority as well as the tribunal was justified in concurring with the said order.

Supreme Court noted that the revenue had not challenged the order passed by the Joint Commissioner. The High Court has not expressed any opinion on this score.

Considering the cumulative effect of the facts and law we have stated, the Supreme Court did not have an iota of doubt that there should not have been reopening of assessment. However, the finding recorded by the High Court overturning the view of the tribunal that oil-cake and de-oiled cake are the same product and, therefore, both are liable to reduced rate of tax despite the notification only mentions oil-cake, is not defensible.

Consequently, the appeal filed by the assessee is allowed in part. The finding of the High Court as regards oil-cake and de-oiled cake being different products as per the notification dated 31st May, 2002 is correct. However, the assessee shall reap the benefit of initial assessment as the same could not have been reopened.

(See 2016-TIOL-71-SC-CT)